The Real Deal New York

Urban Compass shifts commission structure to take on sales

Startup hires Citi Habitats veterans Steve Halpern and Udi Eliasi
By Katherine Clarke | December 19, 2013 02:22PM

Seven months after the much-hyped Manhattan startup Urban Compass bounded onto the real estate scene, the company has shifted its business model towards a more traditional brokerage concept to allow for experienced sales brokers to join the ranks, The Real Deal has learned.

The company, which initially combined a StreetEasy-style listings website with a team of salaried “neighborhood specialists” who functioned much like rental brokers, will now pay some of its agents solely on commission, senior executive Gordon Golub said. The company has also ditched the “neighborhood specialist” moniker, after receiving feedback from both landlords and consumers that the title was confusing.

“Many of the initial hires were asking if they can go to independent contractor status because of the very high closing ratio that they had,” Golub said. “They thought it would be more profitable for them. Others who had seen the success of those who made the change initially are now looking to do the same.”

Close to 50 percent of all Urban Compass agents are now independent contractors working on commission, but the remaining agents can remain salaried if they choose.

“We want the top agents here and the top exclusives here,” said Ori Allon, one of the founders of the company. “We realized that a lot of these sales guys don’t want to work on salary. It really depends on the person.”

Agents are also no longer bound by neighborhood restrictions; previously, they worked with clients in a single neighborhood, and then passed them on if apartment hunters wanted to look elsewhere.

“The players in the industry didn’t really understand what the title ‘neighborhood specialist’ meant,” Golub said. “They were confused as to whether they were licensed and what would happen if [clients] wanted to look in more than one neighborhood. ”

On the commission side, Urban Compass clients used to pay 7.5 percent of a year’s rent on a direct deal — less than the standard New York City broker’s fee of up to 15 percent — which went directly to the firm. On a deal co-brokered with an agent from another firm, the Urban Compass employee received a 5 percent commission and the other agent got 7.5 percent. Now, there is no set commission cap for agents.

The move towards a more traditional compensation model for its brokers coincides with several recent high-profile hires for the firm as well as its move into the sales arena. (The company had previously only handled rental listings.) Indeed, the company has recruited 12 new agents to its ranks, including Steve Halpern and Udi Eliasi, formerly of Citi Habitats. Halpern represents the rental building 214 Lafayette Street, which served as a backdrop for music videos by Beyoncé and John Mayer, according to Urban Compass.

The team also includes agents from firms like Brown Harris Stevens, Town Residential, the Corcoran Group, Halstead Property, and Nest Seekers International, the firm said.

It was unclear exactly how many exclusive sales listings Urban Compass has secured. Golub declined to comment on specific numbers.

“When you start at zero, growth can happen very fast, but the growth that we’ve had so far has been purely on the rental side,” Golub said. “We didn’t have the ability to do sales and we weren’t set up to do so previously. Moving forward, many of the initial hires who used to have the title neighborhood specialist are working with buyers right now. ”

With the move to a typical brokerage commission structure for some of its brokers, Urban Compass will now compete on a more level playing field with other well-established firms.

So, what makes the company stand out in an already crowded arena?

“Urban Compass is the only brokerage that has both proprietary listings and CRM databases entirely developed by their in-house engineering team,” said Andi Bernstein, a spokesperson for the company. “Moreover, we are the only company that has created an agent mobile app that integrates these databases and enables agents to perform every aspect of their job on a mobile phone.”

Still, industry veterans aren’t convinced that reverting back to the old business model — at least in part — is the path to success for Urban Compass, since the company neither has the long track record of existing firms or big-name brokers with trophy listings.

“Over 80 percent of sales transactions are done through real estate brokers — the technology alone is not enough to attract the best and the brightest,” said Andrew Heiberger, CEO of Town, noting that it was unusual to see a firm shift its fundamental principals so soon out of the gate. “In fact, a lot of them don’t even use technology at all. It’s about relationships, networks, understanding the economy as well as market trends, design and architecture.”

  • yobaby

    The name suks

  • yobaby

    Andrew is right. Also wearing a yamulka helps

  • Matt b.

    urban compass is awesome, but I wish they had more no fee listings!

  • Wyatt

    I hate to agree with Andrew H of Town but he is 100 percent correct.
    Urban Compass tried to reinvent the wheel and flaunted money and financial backing in everyone’s face to say…”we can do this bigger and better than you”.

    What the new-to-the-industry executives did not count on is the backlash from real estate veterans who spent their professional careers nurturing relationships with clients and chose to avoid Urban Compass at all costs. (the last straw was taking over the BLDG Listings and acting as if they alone discovered Lloyd Goldman, et al.)

    So far, the only thing they have to offer that is any different than any other firm is a good PR firm.

    • RG3

      great comment

  • Paul

    Gordon Golub is one of the best leaders in the business, he will lead them to the next level.

  • Steve H

    Gordon is still the MAN!

  • Trulia

    Halpern? Saft? Please tell me what ‘notable’ brokers have they nabbed?

  • Damn

    My prediction. Gordon goes to Town in 6 months or less.

  • AnchorSpireHechtCaliberAlpha

    The objective of Urban Compass is to channel the sea of renters through their platform using technology, PR and deep pockets.
    They aren’t any different from most of the brokerage firms out there.
    In their effort to achieve their goals they aim to eliminate the broker from the picture while in fact they have become that broker.
    I also agree with Andrew H fromTown. Technology is not at all sufficient to grow in the sales field. Working with buyers??? All brokers work with buyers these days.

  • R.V

    Trust me Gordon Golub will make this company huge. He did it with Citi and now he will do it with Urban. These guys only come around once and a while.

    • Lori

      Urban Compass “the only brokerage” with proprietary listings and CRM databases? Andi Bernstein seems to have never worked in New York City. A whole lot of brokerages, some small, some large, have proprietary systems in place. Nonsense.

      • what!

        I hear Keller Williams has the best listings database in all of NYC.

  • John

    Heiberger is correct. Just another new brokerage with deep pockets that has to build a name from scratch. Even at TOWN you are seeing agents unsatisfied and leaving back to the other big firms (promised the moon, then reality set in). Technology may be cool, and I definitely appreciate the fact that they ditched the red backpack “neighborhood specialists” who were mostly newbies with on the job training (nice people though) It’s only about relationships,networking, and referrals as an agent no matter what firm you are at. Unless you are going for 5th and Madison Ave co-ops. Then you might need to be at BHS.

    • just asking

      I had the misfortune of dealing with Urban Compass “specialists” this summer and they were ALL newbies with NO knowledge of the real estate industry. Dealing with clients in this insane industry is difficult enough sometimes – and then having to cobroke with a moron who did not know anything was a pain in the ass.
      And how is it that they can call themselves “specialists” when everyone else has to call themselves broker, associate broker or salesperson?

      • Obey

        I think they are allowed to call themselves “specialists” because they hold stock options with the company and are not independent contractors. If BHS or Town were to give their brokers a fixed salary and interest in the company, then I think they have the right to designate their own title.

        • just asking

          thank you for clarifying….I still don’t like dealing with their specialists…..I agree with Danielle from another post.

  • REaltruth

    Urban compass got swampass trying to burn rental brokers like so many before, but sure enough the market showed another “tech” company the door, there are certain things money cant save, like not having agents or listings they dug their own grave, you may have started twitter but real estate is a head splitter, and its hard to beat, plus gordon aint got off the shtwitter since he withered off andrews teet and that portly man typically says less than nothing but yeah it a relationship business so urban will stop buzzing, theyll run out of money same as town as both these bloated dudes keep buying agents till they run themselves into the ground.

  • Danielle

    Thank goodness they finally got rid of the “neighborhood specialist”!! They were no more specialized than a kid out of college who moved to NYC.
    Urban Compass is more expensive than renting with a broker. Its 12.5% for NO FEE apartments (yes you have to pay urban compass a fee when you see an apartment that normally is no fee) or 15% for broker fee apartments that they split the commission 50/50 with the listing broker (aka 2 hands in the pie vs. one…more complicated).

    I wrote more about how urban compass does not make rentals easier or save money here:

  • tw

    Heiberger is 100 percent. Urban Compass changed there 4 times, it hasn’t work yet and never will! big name brokers? plus who did they recruit, never heard of these brokers before.

  • target

    This company better recruit some reputable brokers if they want any credibility. All this flash and tech bang is nothing w/o intelligent and credible brokers. Don’t see it happening though, no good brokers will ever work on a reduced commission scale. Spire, crny, all done that and all mediocre.

  • lucy

    CitiHabitats was one of the worst brokerage firms in the city… URBAN COMPASS nothing but a brokerage firm. I thought they were different but they are just less experienced which actually makes them worse.

  • guest

    The 3 or 4 pivots in UC biz model I think were pre planned and probably part of the long term strategy. I believe they knew all along they wanted to be full service brokers. If Redfin couldn’t gain a foothold in NYC, why would investors throw so much cash at UC? They knew what the long term plan was. I think its a very smart move. A year ago, they were nobody, 3 months ago they were doing $1M revenue based on discount broker model, and now they stand to compete with the big boys and have definitely penetrated the market. If they have the Salesforce CEO backing them, Goldman Sachs, and are worth $150M, look for them to head to the top of the business within 3 years.

    • John

      The valuation of 150M is absolutely absurd

  • UC

    urban compass is BS they claim to be “different” to gain interest and raise money when at the end of the day they are a normal brokerage. “the only brokerage that offers proprietary listings and crm database”… comical

  • Indy Broker

    Does anyone know what % cut Urban Compass takes out of the agents’ commissions?

    (At Citi Habitats you give up 50% of your commission to the firm. After a few years and decent performance you can get that down to 40% or possibly lower.)